The problem of term structure of interest rates modelling is considered in a continuous-time framework. The emphasis is on the bond prices, forward bond prices or LIBOR rates, rather than on the instantaneous rates as in the traditional models. Forward and spot probability measures are...

A term structure model with lognormal type volatility structure is proposed. The Heath, Jarrow and Morton (HJM) framework, coupled with the theory of stochastic evolution equations in infinite dimensions, is used to show that the resulting rates are well defined (they do not explode) and remain...

Alternative ways of introducing uncertainty to the term structure of interest rates are considered. They correspond to the different expectation hypotheses...

Alternative ways of introducing uncertainty to the term structure of interest rates are considered. They correspond to the different expectation hypotheses. The dynamics of the term structure is analysed in a convenient framework of stochastic equations in infinite dimensions.

The extension of the Black-Scholes option pricing theory to the valuation of barrier options is reconsidered. Working in the binomial framework of CRR we show how various types of barrier options can be priced either by backward induction or by closed binomial formulas. We also consider...